PARIS, Feb 6 - The United States will oppose any efforts by fellow members of the Group of Seven (G7) economic powers meeting this weekend to counter the fall in the dollar, Nobel-prize winning economist Joseph Stiglitz said on Friday. Stiglitz, a former chief economist at the World Bank, also said in interviews with French media that the European Central Bank (ECB) should act to bring down the euro's strong exchange rate against the dollar, which is hurting European exporters. "The Bush administration will make no concession," Stiglitz said in an interview with the French business daily La Tribune, ahead of the meeting of G7 finance ministers and central bankers in Boca Raton, Florida. "(U.S. President) George W. Bush needs the fall in the dollar to support American growth and to be re-elected. Even if that is to the detriment of Europe."
In an interview on France Inter radio, Stiglitz added it was hard to see how the United States could cut its budget deficit as Bush appeared set on making further tax cuts and increasing military spending. "As long as the deficit remains, confidence in the American economy will be weak and the dollar will be weak," he said. Policy-makers in Europe have stressed the risks the dollar's fall poses to euro zone exporters, but a poll of 46 currency strategists showed few expect the G7 to say anything to stop the euro, yen and Canadian dollar from appreciating. A stronger euro makes euro zone exporters' products more expensive outside the currency bloc. Stiglitz said the ECB needed to act to stem the rise in the euro , which traded at around $1.2545 in early European trade on Friday -- just below record highs it hit in January. "The responsibility for doing something about the exchange rate, which is extremely important for the European economy, must rest with Europe," he said on France Inter. "The European Central Bank should intervene to bring down the exchange rate of the euro and it should also lower interest rates," he added. "If it did this, and it could do this if it wanted to, almost surely the euro would decrease in value relative to the dollar."
The ECB left interest rates unchanged at 2.0 percent on Thursday -- twice the 1.0 percent level in the United States. It would be risky for Europe to rely on U.S. economic growth to spur its own growth, as the U.S. fiscal and trade deficits made the U.S. recovery fragile, Stiglitz said. However, there was little risk of a crash in the dollar's value. "The probability of an abrupt fall in the greenback seems weak to me in the coming months," he said.//